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WOLF BLITZER, HOST: It's 11 a.m. here in New York and in Washington, 8 a.m. in Los Angeles and 6 p.m. in Baghdad. Wherever you are watching from around the world, thanks very much for joining us for "Late Edition." The top U.S. military commander in Iraq is mincing no words in blasting Iran's role in Iraq. General David Petraeus is calling Iran's ambassador to Iraq a member of the Iranian Revolutionary Guard's Quds force, a group the U.S. Senate recently branded as a terrorist organization. General Petraeus also tells CNN's Jim Clancy that a group of Iranians now in U.S. custody in Iraq were part of the effort to fuel Iraq's sectarian violence.

(BEGIN VIDEO CLIP)

U.S. GENERAL DAVID PETRAEUS, COMMANDER, MULTINATIONAL FORCE, IRAQ: Now, let's be very clear. There is no debate that the individuals who we have detained are Quds Force members. We have confirmation from a variety of different intelligence sources and methods. So that's very, very clear.

The Quds force controls the policy for Iraq. There should be no confusion about that either.

(END VIDEO CLIP)

BLITZER: During his visit to Washington this past week, I spoke with Iraq's president, Jalal Talabani, about his country's relationship with Iran and a lot more.

(BEGIN VIDEOTAPE)

BLITZER: Mr. President, Welcome back to Washington. Good to have you back in the United States.

PRES. JALAL TALABANI, IRAQ: Thank you very much. I'm glad to see you again.

BLITZER: When do you think the United States will begin to start reducing significantly the number of its troops in Iraq? About 160,000 American forces there.

TALABANI: In next year.

BLITZER: When next year?

TALABANI: In the spring of the next year, I think.

BLITZER: Going down to what?

TALABANI: Yes. I think if this rearming of the Iraqi army will be speed (ph), it will be done quickly. In the next spring, the United States can start to reduce tens of thousands of these forces from Iraq. And I think it's possible at the end of the next year that a big part of the American Army will be back here.

BLITZER: What percentage would you say of 160,000? By the end of 2008, how many U.S. troops would you guess would still...

TALABANI: More than 100,000 can be back by the end of the next year.

BLITZER: So it will be -- by the end of next year, it will be down to 60,000 American troops?

TALABANI: Well, I cannot decide the number of the...

BLITZER: Approximately?

TALABANI: It is up to the commanders of the United States, military commanders to say. But I think big majority of the American forces can leave the country.

BLITZER: But would you like to see the United States have permanent military bases in Iraq?

TALABANI: I am supporting military bases. And I am proposing since long time three bases, three military bases after the ending of the American regime. One in north, one in the south, and one in the middle of Iraq, with small numbers of American officers and soldiers for training and for the stability of Iraq, and preventing our neighbors from interfering in our internal affairs.

But I cannot describe if permanent or (inaudible) it will be, preferred (ph) for a while until it will be needed.

BLITZER: All right. Let's talk about this resolution that passed the United States Senate. Senator Joe Biden introduced it. It passed 75 to 23. It supposedly calls for what they say is a soft partition of Iraq into three areas.

I'm going to read to you what Senator Biden wrote with Leslie Gelb the other day in The Washington Post: "Federalism is the one formula that fits the seemingly contradictory desires of most Iraqis to remain whole and of various groups to govern themselves for the time being. It also recognizes the reality of the choice we face in Iraq: a managed transition to federalism or actual partition through civil war."

Are those the two options, civil war or what he calls this federalism, three separate areas?

TALABANI: I agree. I agree with Senator Biden. And I have full respect of him. I know him as a good friend -- a great friend of the Iraqi people and Kurdish people. And I think the resolution passed by the Senate is a very good one. And I protected it in my interview with Al Hurra.

I say that those who are criticizing it, they didn't read it carefully, because if they read it, you see in every article that it is insisting on the unity of Iraq, of the security of Iraq, of prosperity of Iraq, of national reconciliation and asking our neighbors not to interfere in internal affairs of Iraq.

And even when talking about other regions, it says it must be according to the population and the elected leaders of the country.

BLITZER: You're the president of Iraq, but you are also a Kurd -- an Iraqi Kurd. I want to read to you from a recent article in The Los Angeles Times about Kurdistan and tell me if you agree with it.

TALABANI: I didn't read it.

BLITZER: I'm going to read it to you right now.

TALABANI: Yes, please.

BLITZER: All right. Listen to this: "The Kurdish region's exploding economic and political power has begun to shape northern Iraq's reality. Few doubt what will happen when U.S. forces exit. Grown strong and rich in their enclave of more than 16,000 square miles, Iraq's Kurds will rush to annex Tamim and other areas in Diyala and Nineveh provinces they have laid claim to, which could double the size of their de facto state."

Do you think that that will happen? Once U.S. troops leave, Kurdistan will double in its size?

TALABANI: No, I don't think so. I think this is...

BLITZER: You are smiling, though, when you're saying that.

TALABANI: Yes, because -- no, I think this problem will be solved in this year, before the American departure. Because according to 140 article of the constitution, the issues of other Kurdistan parts which are not now included in the regional government must be solved according to the...

BLITZER: Should Kurdistan be -- should the Kurds have an independent state?

TALABANI: No. There is no possibility of having independent Kurdistan for many reasons. And I think the interests of the Kurdish people nowadays is in being a part of democratic federated regime in Iraq.

BLITZER: And what's the biggest downside? Because I've watched the Kurdish situation for many, many years, and a lot of people who love the Kurds have always felt these are people who should have their own independent state. TALABANI: Yes. Many people think, but it is not realistic.

BLITZER: Why?

TALABANI: Let me explain for you. Let us imagine that Kurdistan declares independence. Turkey, Iran, Iraq, Syria, they then send arms to fight that, but close the border, how we can leave? How can go outside and come inside? This is impossible.

And the interest -- and in reality, no, I don't think that Turkey or Iran or Syria will accept this. So, we must be realistic. Now the interests of the Kurdish people is in the framework of a united, democratic, federative Iraq.

And we can, as we have now, rule our area, develop it. And you see now our area is secure, prosperous, and developed very well. So this...

BLITZER: Kurdistan is a model. Let's talk a little bit about Nouri al-Maliki, because he's been widely accused of not getting the job done. There were hearings in Washington this week of vast corruption in Iraq, $18 billion, that was a number that was thrown out.

I'm going to read to you what Ayad Allawi, the former interim prime minister of Iraq, wrote in The Washington Post back in August. He said: "Prime Minister Maliki has squandered Iraq's credibility in Arab politics. He cannot restore it. It is past time for change at the top of the Iraqi government. Without that, no American military strategy or orderly withdrawal will succeed. And Iraq in the region will be left in chaos."

Those are the words of Ayad Allawi.

TALABANI: Well, I don't agree with my friend Ayad Allawi. I think Maliki is now, in this moment, the best man to be prime minister of Iraq. He is a clean man. He is against all militias. And he's facing all non-governmental...

BLITZER: What about the accusations of corruption in this government?

TALABANI: Yes. I will come to it. He is against all kinds of militias. Second, he is a clean man. He is against corruption. Corruption have been done before his seizing the power. And there are corruptions through. But that was in the governments before him.

Many people were accused even at the time of my friend Ayad Allawi, minister of defense, for example, what were accused for corruption...

BLITZER: So you still have confidence in Nouri al-Maliki?

TALABANI: Yes. I have -- personally, I have confidence in him. He is a pure and clean man. And he's against corruption.

BLITZER: Is he too close to the Iranians?

TALABANI: No, is independent. He's independent. And he was always. Living outside the country, even at the time of opposition, he lived in Syria, not in Iran.

And believe me, my relation with Iran is better than his relation with Iran. Believe me.

BLITZER: Do you trust the Iranians, that they're helping Iraq, or are they hurting Iraq?

(CROSSTALK)

Because the U.S. position is they are hurting.

TALABANI: In politics, there is not trust. In love, it is between a boy and girl. But in politics there are national interests. I think Iranians nowadays, nowadays, they are helping to stop the Mahdi Army, which is good -- very good help to Iraqi people because the activity of Mahdi Army was threatening a civil war among Shias and sectarian conflict.

BLITZER: Because if you think they are helping, I want you to listen to what General David Petraeus recently said when he was here in Washington testifying before the Congress.

(BEGIN VIDEO CLIP)

PETRAEUS: None of us, earlier this year, appreciated the extent of Iranian involvement in Iraq, something about which we and Iraq's leaders all now have greater concern.

(END VIDEO CLIP)

BLITZER: He says they're sending arms...

TALABANI: Yes, but he...

BLITZER: ... and providing explosive devices.

TALABANI: Let me explain. We Iraqis are not preferring to have interference from any country, either from Iran, nor from Syria, nor Turkey, nor Saudi Arabia, everywhere. We want independent Iraq that no one of our neighbors can interfere in our internal affairs -- of course, Iran included; we don't want Iran to interfere in our internal affairs.

We want good relations with Iran. We have a long border with Iran. We are in need to have a kind of good relations with Iran, but not interference in our internal affairs at all.

BLITZER: All right. Let me ask you this question about a resolution that Senator Joe Lieberman and Jon Kyl introduced that was passed by the Senate 76 to 22.

And it says this: "It is the sense of the Senate that the United States should designate Iran's Islamic Revolutionary Guards Corps as a foreign terrorist organization."

TALABANI: Yes. But I have respect and very good relations with Senator Lieberman. He has been (inaudible). But I cannot describe all Quds Force as terrorists, because it is a part of Iranian regime. They are the Revolutionary Guards of Iran.

So perhaps some people of them committed some mistakes there, here, but I cannot -- the biggest armed force of Iran, I cannot describe it as terrorist army.

BLITZER: We are almost out of time. A quick question on the private American security forces...

TALABANI: Yes.

BLITZER: ... that are protecting American diplomats, American contractors in Iraq, the Blackwater uproar. How do you resolve this issue, because right now...

(CROSSTALK)

BLITZER: ... they are doing their job to protect American diplomats?

TALABANI: They did good jobs and they did -- in general they were protecting American diplomats. But sometimes they kill civilians and innocent people. So it was no reason for doing this kind of crime.

BLITZER: Should they be subject to Iraqi law, these private American contractors?

TALABANI: According to the law issued by Ambassador Bremer, no. But we think, if you get our independence...

BLITZER: You have your independence.

TALABANI: Yes, but not completely. You see, still, the security is shared between multinational forces and Iraqi forces. When we will finish it, then there must a kind of -- of course, Iraqi forces must look to everything. But nowadays, I think there must be special treatment for those who are protecting our American friends, providing the condition they not kill Iraqi civilians.

BLITZER: But if they do kill Iraqi civilians, who should they -- who should hold them accountable?

TALABANI: Well, we ask that there must be a joint committee between United States of America and Iraq -- the Iraqi government to discuss this issue and to see and look for a solution for this issue.

BLITZER: Because as you know, the prime minister, Nouri al- Maliki, he despises this arrangement, that there are these private American citizens...

TALABANI: No. He asked that a joint committee must be formed between the United States and Iraq to solve this problem. And this is our official position.

BLITZER: We have to leave it there, Mr. President. Always good to see you. Welcome back to Washington.

(END VIDEOTAPE)

BLITZER: And coming up next.

(BEGIN VIDEO CLIP)

BLITZER: Do you have trouble sleeping at night, knowing what the accusations against your government are?

(END VIDEO CLIP)

BLITZER: Some very tough questions for Sudan's visiting foreign minister. We'll ask him whether his government and his country are engaged in crimes against humanity and genocide.

Then, a very different perspective, from two experts on the crisis in Darfur.

And later, an in-depth interview on the U.S. economy and much more with the former Federal Reserve chairman Alan Greenspan.

Lots more, coming up, right here on "Late Edition."

(COMMERCIAL BREAK)

BLITZER: Beautiful day here in New York City. Welcome back to "Late Edition." I'm Wolf Blitzer and we're in New York today.

Ahead in our next hour, by the way, the former Federal Reserve chairman Alan Greenspan. He'll weigh in on the state of the U.S. and world economy. Is a recession heading our way?

But first, Sudan is only two years removed from a long and devastating civil war. It rages.

Still, the country's so-called unity government stands accused of participating in the slaughter of at least hundreds of thousands of people in the Darfur region. Critics of the government, including President Bush, are calling what's happening in Darfur genocide.

This week I spoke with Sudan's foreign minister, Lam Akol.

(BEGIN VIDEOTAPE)

BLITZER: Foreign Minister, thanks very much for joining us. Welcome to "Late Edition."

LAM AKOL, FOREIGN MINISTER, SUDAN: Thank you.

BLITZER: Let's talk about, first of all, your role as the foreign minister of Sudan. You're a highly educated individual, have a Ph.D in engineering from a major university in England.

How does it feel to represent a country, right now, that's been so widely accused of engaging in crimes against humanity and genocide against black Africans?

AKOL: Well, in the first place, I would want to thank you for giving me this opportunity to respond to some of the issues that you have raised.

The Sudan government, today, is a new government. We call it the government of national unity. That came about as a result of the peace agreement between the south and the north, the comprehensive peace agreement. And, unfortunately, some quarters tend to extrapolate the situation before 2005 to the present. And they carry on all the baggage.

BLITZER: Are you saying that the government now is not engaged in genocide?

AKOL: Yes. The government now is a government of national unity that has come with a new program based on the CPA, founded on democratic transformation, freedom of expression, freedom of movement.

BLITZER: Do you acknowledge, though, that genocide did occur previously?

AKOL: There wasn't any genocide in...

BLITZER: There was or was not?

AKOL: There wasn't, there is not.

BLITZER: There was not.

AKOL: Yes. There is only one country in the world which has said that there is genocide in Sudan. And genocide is a precise word with a precise definition. And this definition does not apply on Sudan.

BLITZER: All right. Let's listen, precisely, to what President Bush said at the United Nations General Assembly last week. Listen to this.

(BEGIN VIDEO CLIP) PRESIDENT GEORGE W. BUSH: My nation has labeled what's taking place in Darfur as genocide. And when we find genocide, it's time to do something about it. Maybe some don't think it is genocide, but if you've been raped, you think it is the human -- your human rights have been violated. If you are mercilessly killed by roaming bands, you know it's genocide.

(END VIDEO CLIP)

BLITZER: All right. What do you say to the president?

AKOL: Well, of course, as I said, there is only one country that has said there is genocide, and this is the United States, and in particular the president. And from what he has just said, from the clip that you have just played, if it's rape, yes, it's an obnoxious act, but it is not genocide.

BLITZER: Do you acknowledge...

(CROSSTALK)

AKOL: There is a human violation...

BLITZER: I understand you are saying that your government did not engage in genocide, but do you acknowledge that your government engaged in crimes against humanity?

AKOL: Not government engaged in that in any war, whether in Darfur or in southern Sudan. In southern Sudan before, we had war for two rounds I can say: in 1955 to 1972; 1983 to 2005. In these wars, the scale of death is more than Darfur...

BLITZER: Well, here's what the United Nations...

AKOL: But...

BLITZER: The United Nations statistics, and I will put them up on the screen so our viewers will understand what we are talking about. According to the United Nations, not the U.S., over 200,000 people have died, have been killed. Over 2.2 million have been internally displaced. Over 3.5 million have been affected. Those are numbers that have come out from the United Nations.

And I'll read to you from what their report in March -- the United Nations Human Rights Council report said about what your government is doing together with the Janjaweed, the rebels there.

"Janjaweed attacks, sometimes in concert with Sudanese government land and air forces, have been and continue to be primarily directed against the civilian population of Darfur. Women, children and men have been killed indiscriminately. Villages have been razed, livestock stolen or killed, and crops destroyed, and whole populations forcibly displaced in part in an attempted to deprive rebel groups of support and resources. In particular, rape and sexual assault have been widespread and systematic, terrorizing women and breaking down families and communities." And the U.N. Human Rights Council report concludes with this: "The government" -- meaning your government, sir. "The government of the Sudan has manifestly failed to protect the population of Darfur from large-scale international crimes, and has itself orchestrated and participated in these crimes."

That is a damning indictment against the Sudanese government.

AKOL: Well, let me inform you that this particular report was never endorsed by the U.N. Human Rights Commission -- consulate, was never endorsed. This is a report written by the professor -- American professor. He didn't go to Sudan. He went to Chad. This report was written in Chad.

That was the reason why the council did not endorse it. So...

BLITZER: But -- but...

AKOL: ... that is why...

(CROSSTALK)

BLITZER: ... on a factual basis, the charges leveled, that I just read, are they factually true?

AKOL: If they were factually true, they would have been endorsed by the council. The council...

BLITZER: Not necessarily, because that's a political body, and Sudan has some political support from other countries in the region and beyond.

AKOL: No, the council threw it out because in any investigation you can never rely on secondhand evidence. You'd have to get the evidence from the people concerned. They never set foot in Sudan. And that -- through a lot of...

(CROSSTALK)

BLITZER: But you know there have been enormous eyewitness accounts...

AKOL: Through a lot of...

BLITZER: There have been enormous eyewitness accounts of the brutality of the rape, the killing that's gone on in Darfur.

AKOL: Well, you know, anybody can go write what you want. Let me be very clear to you. What I am saying is that in war -- I'm not denying that in any war people will get caught in crossfire. In war there will be the unnecessary deaths. In war there could even be excesses against human rights and all the other factors.

This is common. But what we don't agree with is the way that exaggerated and the way they are classified as genocide. Let me come to the figures you have displayed. I don't want to argue whether it was 200,000 or whatever it is...

BLITZER: Those are U.N. figures.

AKOL: ... but if we take them at the face value, if genocide is on the scale of people who have died, in the last war in southern Sudan, more than 2 million people died, more than 4 million went into internal displacement. Almost a million went to -- became refugees. And not a single person said, this is genocide.

BLITZER: And so I just want to be precise. What you are saying is that these are casualties of war and that there hasn't been a deliberate effort by the Janjaweed, your allies, and the Sudanese military, to single out the non-Arab Africans for death?

AKOL: Yeah.

BLITZER: As you know, the former president, Jimmy Carter, went there with a group of people called The Elders, including the wife of Nelson Mandela and Bishop Tutu, among others. And he tried to get in to see some individuals, to get an eyewitness account of what was going on.

He was blocked by your soldiers from going in. He was pretty angry at the time, although later he sought to play it down a little bit. But the wife of Nelson Mandela, she told the Associated Press this on Wednesday. She said: "The Sudanese women even use gestures to show us how brutally they were treated. The government," meaning your government, she says, "doesn't seem to have an understanding of what it means for women to say, we are being raped."

That's from the wife of Nelson Mandela.

AKOL: Well, that is an individual opinion, of course, from -- what, how many hours did she spend in...

BLITZER: Well, she saw women who were saying -- who were giving her the gestures and telling her that they were raped.

AKOL: They had all the freedom to talk to those women, not only gestures. They had all the...

(CROSSTALK)

BLITZER: Well, they didn't have all the freedom, because they were blocked from going into some areas.

AKOL: That particular incident could happen anywhere. You know, even last time when the -- Mr. Holmes, the U.N. undersecretary for humanitarian affairs, was even working with the governor, they were stopped by a soldier, you know, from going. But at the end this was sorted out because they didn't know what he was doing.

What is important is that this group met the president, and the president explained to them the situation. They were happy with the meeting. They went...

(CROSSTALK)

BLITZER: They met with your president, Bashir.

AKOL: Yeah. They went and met the first vice president, Salva Kiir, in Juba. They also listened to him, what he had to say about the situation in Sudan and so on. They got the best welcome they could get.

BLITZER: I want to show you this map. Look at the...

AKOL: The individual incidents should not be taken to be government official positions.

BLITZER: Look at this map. This is a map that the State Department put out showing villages -- all of these villages, from aerial satellite reconnaissance photography, destroyed as a result of what your government, together with the Janjaweed, have been engaged in.

I mean, look at that and tell me what you think.

AKOL: When a village is destroyed, that is not necessarily the government. What about the rebels when they attack? Don't they destroy villages? Don't they destroy towns? Recently, this a brutal attack on the African Union site, it killed more than (ph) 12 people from African Union who have come to help the Sudanese. People don't talk about that, because these are done by the rebels.

BLITZER: So you don't even want to look at this map, I see.

AKOL: Well, I mean, I'm saying I've been in war before. So a village is not necessarily done by one side. Both sides could be a cause for the destruction of a place.

BLITZER: There's a moment now that the United Nations is asking to cooperate in a new peacekeeping effort in Darfur. And the president, President Bush, made a personal appeal to your government the other day. I want to play for you what President Bush said.

(BEGIN VIDEO CLIP)

BUSH: We call on the government in Khartoum to facilitate the deployment of a robust U.N. peacekeeping force to save life. We call on all parties to cease arms sales to the combatants. We expect President Bashir to observe a cease-fire during next month's peace talks. And we want the rebels to do the same.

(END VIDEO CLIP)

BLITZER: Will you do what he's asking?

AKOL: This is just talking to a converted church. We have done this a long time ago. We have agreed in as far back as in November that there should be an African Union U.N. peacekeeping operation in Darfur.

BLITZER: Would you let them operate?

AKOL: But this was endorsed as Resolution 1769 in the U.N. Security Council. And we have endorsed that resolution. We have now started the implementation process. We have granted land and all the facilities for their troops. We have declared a unilateral cease-fire since when we were in Rome on the 13th of September.

So I don't know whom is he talking to. We have done all these things before the president could give his speech.

(CROSSTALK)

AKOL: Maybe he is not being advised by his advisers.

BLITZER: I will end the interview, Minister, with what I started the questioning with.

AKOL: Yes.

BLITZER: You represent Sudan, a country that's been accused of these horrific crimes. And I pointed out that you're experienced, you're highly educated.

Do you have trouble sleeping at night, knowing what the accusations against your government are and that you're representing this government?

AKOL: What I know is that most of these are accusations are misrepresentation of the facts. Yes, there is a war in Darfur. As a result of war, some lives are lost, some human rights are violated. There is a lot of trauma. People are not going about doing their normal life and therefore they need relief assistance as a result.

All these are happening in Darfur. The way to solve that is not trying to mud-sling or finger-point to the government or other sources. The best way to do it is to cooperate, as the international community has agreed, so that we have a last round of peace talks that will solve all the outstanding political problems behind the conflict in Darfur.

You know, the best way is cooperation, not finger-pointing.

BLITZER: Well, let's hope the slaughter ends, the fighting ends, and that there can be some positive outcome.

Foreign minister, thanks very much for joining us.

AKOL: Thank you.

(END VIDEOTAPE)

BLITZER: And up next on "Late Edition," did what we just hear from the Sudanese foreign minister, Akol, actually square with what's really going on in his country?

We'll talk about it with two experts on the region. They're standing by live. Stay with us. "Late Edition" will be right back.

(COMMERCIAL BREAK)

BLITZER: Welcome back to "Late Edition." I'm Wolf Blitzer in New York.

Joining us now from Washington, two experts on what's happening in Sudan right now. Susan Rice is a former assistant secretary of state for African Affairs. She's currently a senior fellow with the Brookings Institution. And John Prendergast is a former top adviser with the International Crisis Group. He's now the co-chairman of the group called "Enough," an organization working to stop the atrocities in Darfur.

Thanks to both of you, very much, for coming in.

Susan, let me start with you. What we just heard from the Sudanese foreign minister -- is he right when he says that only the United States is accusing Sudan of genocide?

SUSAN RICE, BROOKINGS INSTITUTION: Wolf, that interview with the Sudanese foreign minister revealed a lot. No, he's not right. There are people all over the world who have termed this genocide.

BLITZER: But has any other government?

RICE: The United States is the principle government that has termed it genocide. It did so after an exhaustive investigation on the ground, with over 1,000 experts who conducted interviews throughout the region.

President Bush, the U.S. Congress, and many of the American public have called this genocide -- quite rightly so.

The foreign minister really was spectacular in his dissembling during that interview. He really is, to be charitable, a disgrace to the people of Sudan and particularly to the government of southern Sudan.

This is much more than a civil war. There are civil wars all over the world, but the government of Sudan made a conscious decision to go one step further and employ tactics that amounted to genocide: rape, displacement, murder, burning of villages, to wipe out large parts of entire tribes. And as a consequence, hundreds of thousands of lives have been lost.

BLITZER: All right. John, why is it, though, that other governments, including close allies of the U.S. in Western Europe and elsewhere, and in Africa, are reluctant to call it genocide?

JOHN PRENDERGAST, CO-CHAIRMAN, ENOUGH: It is a real debate amongst legal scholars about the application of the term "genocide." If you look at the genocide convention, it says that an entity must take actions aimed to destroy, in whole or in part, a specific group of people, whether that group is racial, religious or an ethnic group. And people like Susan and I, the government of the United States, the Congress and others that she cited and many, many legal scholars around the world say that, in fact, the targeting of three specific ethnic groups in Darfur, the Fur, the Zaghawa, and the Masalit, does, in fact, amount to a genocidal counterinsurgency strategy aimed to wipe out, in whole or in part, these groups of people, to render them extinct.

And so many governments shy away from that strong of a designation, because they fear that it has implications for them having to act. And I think that's really what the problem is.

BLITZER: Susan, Jimmy Carter, the former U.S. president, was there this past week on a mission with so-called elders going in to try to help the situation.

He said this, according to the Associated Press, on Thursday.

I'll read it to you. "Rwanda was definitely a genocide. What Hitler did to the Jews was. But I don't think it's the case in Darfur. I think Darfur's a crime against humanity, but done on a micro scale, a dozen Janjaweed attacking here and there. I don't think the commitment was to exterminate a whole group of people, but to chase them from their water holes and lands, killing them in the process, at random."

So even Jimmy Carter's reluctant to call it a genocide.

RICE: Wolf, with all due respect to President Carter, who's committed himself to many good humanitarian deeds, the weight of opinion in this country is firmly against him.

The weight of opinion suggests that what is going on in Sudan is genocide; it has been genocide for now over four years.

We're no longer debating that in this country. What we're debating is whether the international response and the U.S. government response has been sufficient.

I think it's unfortunate. President Carter has a long history of close ties to the government of Sudan that go back many, many years. There have been times when he has resisted pressure that the United States government has sought to impose on the government of Sudan, frankly going back to the Clinton administration.

So this is not an entirely surprising judgment he's rendered. But I think, in fact it's not accurate.

BLITZER: What do you think, John?

PRENDERGAST: I think, if you look at the evidence -- and I've spent a lot of time on the ground in Darfur, in the refugee camps and the displaced camps, interviewing people who have been victimized, survivors of these genocidal attacks. They're very specifically targeted, three ethnic groups. That, in my view and in the view of many legal scholars, is genocidal. And they say it, that attackers say it. The government of Sudan has backed very strongly these Janjaweed militias, gave them arms, allowed them to use attack helicopters and ground transportation, has ferried them around and provided the kind of backup support to destroy 1,500 villages.

They haven't destroyed one village outside of those groups of people. They've focused on those and they have tried, in effect, to wipe them from the face of the earth.

BLITZER: So, John, you're saying Jimmy Carter is wrong?

PRENDERGAST: Yes, I would be saying Jimmy Carter is wrong, that his understanding, or his interpretation of the genocide convention and the legal texts he said he consulted does not square with the evidence on the ground that I have seen for the last 4 1/2 years with my own eyes.

BLITZER: Susan, we also heard the foreign minister, Lam Akol, insist that his government, the so-called unity government, now, in Khartoum is cooperating with the United Nations, with international peacekeepers who are coming in and trying to deal with this crisis.

Is that true?

RICE: Their cooperation has been very late and very halting and ultimately still not acceptable. The Security Council first passed a resolution a year ago last August calling for the deployment of peacekeepers. The Sudanese government blocked that deployment repeatedly until early this summer.

It finally agreed to an expanded force, but now we're debating such things as whether peacekeepers can come in from outside of Africa, which they must, because the specialized capabilities that the U.N. requires, logistical capabilities, airlift capabilities and the like, cannot be provided from within Africa. Yet the Sudanese government continues to insist that those forces can't participate in what is a U.N.-led mission. So that's one example of the many obstacles they've put up in front of this force.

BLITZER: Is the situation right now, John, in Darfur getting better or has it stayed the same?

PRENDERGAST: It's neither of the two. It's getting worse, Wolf. And it's really, really urgent that this force that's been authorized by the United Nations Security Council get deployed as soon as possible.

The role of the United States in that is very clear. We've got to provide the kind of equipment that Susan just cited. We've got to provide attack helicopters. We've got to provide the ground transportation, the protection for the force so that they can protect civilians in Darfur.

BLITZER: All right. I'm going to ask both of you to stand by, because we're going to take a quick break. We're going to continue this subject of what's happening on the ground in Darfur, what the U.S., what the international community should be doing about it. Much more with Susan Rice and John Prendergast right after this.

(COMMERCIAL BREAK)

BLITZER: Statue of Liberty here in New York. We're reporting from New York today. Welcome back to "Late Edition." We're getting insight into what's happening in Sudan from the former assistant secretary of state, Susan Rice, and an international human rights activist, John Prendergast. John, reports coming in now from the Associated Press saying one whole town in Sudan has just been razed, a town called Haskanita. I wonder if you've seen that report and what you can tell us what's going on right now. Because we just heard the Sudanese foreign minister suggest they are cooperating with this new international peacekeeping effort.

PRENDERGAST: It just demonstrates that everything he's saying, you just take the opposite interpretation. Because I've been talking to people all morning and last night. And the town that was closest to where the African Union peacekeepers that were killed last week, the town closest to that location was just burned to the ground by the Sudanese government in its operation.

They've contested that area for quite some time with the rebels and decided, let's just put this one to bed, and they burned it. So, all of the people have been displaced, about 1,000 people displaced and a hundred people killed is the first estimate coming out from the ground.

And that's always a low estimate, frankly. So, we're very, very concerned for the people that have just freshly been rendered homeless by further evidence of the government's destructive policies in Darfur despite the rhetoric from the foreign minister and the president.

BLITZER: Susan, what's this latest incident say to you?

RICE: It says that the Sudanese say one thing and do another. That's their typical pattern over the course of this 4 1/2-year genocide. And frankly, over the course of the last many years since this government has been in power.

The reality is that, daily on the ground, the killing continues. The dying continues as a result of displacement and disease. And the Sudanese government has sought to deflect international attention, international resources, international public opinion by the sort of skilled rhetoric you saw out of the mouth of the Sudanese foreign minister. But it is utterly belied by the facts on the ground. And this is just today's evidence.

BLITZER: Let's talk about what the international community could be doing to try to ease this crisis, John. China, in particular, which has a strong relationship with Sudan.

The Chinese special envoy on African affairs told the BBC on Tuesday, said this: "We've been trying to persuade our Western colleagues that an iron hand may not necessarily be the only way to solve problems. Imposing sanctions will only make the situation even more complicated by discouraging Sudanese government cooperation on resolving the issue."

They have a very strong economic relationship, Sudan and China. China buys a lot of oil from Sudan, among other things. Give us your sense of the role that China plays in this crisis.

PRENDERGAST: Well, they're the country that probably has by far and away in fact the most leverage on the government of Sudan. They buy about 70 percent of Sudan's oil exports, and they're a massive investor, multi-billion dollar investor in Sudan's oil sector. So they have a lot of leverage.

And because of an international campaign that has been waged by activists, not only in the United States but around the world, demonstrating the links between the Sudan government and the Chinese government, in advance of the Olympics, which are going to be held in 2008 in Beijing, the Chinese government has begun to act a little differently than its rhetoric publicly.

It's begun to act behind the scenes, applying a little more pressure on the government of Sudan to go along with some of the things the international communities wants it to do. This is a great opportunity to play good cop, bad cop. Let the Chinese government be the good cop, encouraging quietly behind the scenes the government of Sudan to do the right thing. Let the United States on the other side of the fence be the bad cop.

Here's a chance for us to coordinate our diplomacy, work with our European allies and African friends to make sure that we can get the things that need to be done entrained on the peace front and on the protection front to get a solution to the genocide in Darfur today.

BLITZER: Susan, what do you think -- and you served in the previous -- the Democratic administration of President Clinton. What do you think the current administration, the Bush administration, President Bush in particular, needs to do right now? Because he's been very forceful in blasting the Sudanese government for engaging in genocide.

RICE: He's been forceful rhetorically, Wolf. But I think that the United States's actions have not matched the rhetoric over the last four years as this genocide has unfolded. The administration this week lobbied the Congress to hold off on a new piece of legislation that would have increased pressure on the government of Sudan, focused on its oil sector.

That's the kind of mixed signal that really leaves us wondering quite how committed the administration is to doing what is necessary to end the genocide. We've been great in providing humanitarian assistance. We have given support to the African Union.

But now is the time to keep the pressure on the government of Sudan for two reasons, wolf. Because it continues the killing in Darfur, as we just have seen again today. And because it continues to throw spanners in the works to blow up the peace agreement that was negotiated two years ago with the Southern Peoples Liberation Movement. So, we have two wars. One, a hot war in Darfur, and the other a cold war that could turn hot any minute in the south, largely because the government hasn't adhered to its terms in the comprehensive peace agreement. So U.S. pressure is critical, and we need to make sure that this African Union/U.N. force deploys rapidly with all of the support and equipment that it needs. And the U.S. could do more in that regard.

BLITZER: All right. Susan Rice, thanks very much for coming in. John Prendergast, thanks to you as well. An important subject which we won't ignore here on "Late Edition."

Coming up, the former federal reserve chairman, Alan Greenspan, you're going to want to hear what he has to say about the current U.S. housing slump and the possibility of a recession.

You're watching "Late Edition."

(COMMERCIAL BREAK)

BLITZER: He could be the most irreverent politician in the United States. My conversation with the once and possibly future candidate for governor of Texas, Kinky Friedman. "Late Edition" will be right back.

(COMMERCIAL BREAK)

BLITZER: He's selling cigars, promoting a new book, and considering another run for governor of Texas. I spoke with musician and author Kinky Friedman in "The Situation Room."

(BEGIN VIDEOTAPE)

KINKY FRIEDMAN: I guess the great leaders in our country, you know, have never put party first. Today that's all these people are doing. So, I would say of all the candidates running, which ones inspire you?

BLITZER: Well, I'm asking you.

FRIEDMAN: Does any living person inspire you that's in politics?

BLITZER: Do you like any of these Republicans or Democrats?

FRIEDMAN: No. Well, I like Hillary. I met her a few times. I like -- McCain I think he elements of greatness. And I think Ron Paul's probably telling the truth. Nobody's listening.

BLITZER: He raised $5 million in the last quarter.

FRIEDMAN: The rest of them are really the same guy admiring himself in the mirror. It is a government of the money, by the money and for the money.

BLITZER: So you don't really respect a lot of these politicians.

FRIEDMAN: No, none of us do. Eighty-six percent of us think that the greatest crisis we got in government is nobody believes them.

BLITZER: But you want to get involved in politics and you want to have a role. Is that right?

FRIEDMAN: No, I'm not sure I want to do this.

BLITZER: You did it once. You ran.

FRIEDMAN: I did. I gave Texas my telephone number and she never got back to me, basically. You know, the crowd picked Barabas, that's all.

BLITZER: But you know what they say, if at first you don't succeed, try, try again. Huh?

FRIEDMAN: Well, I'm thinking about it. I really think education, health care and the death penalty in Texas have been the big issues of our day that really affect people's lives. The politicians are letting them slip through their fingers and what they're doing is criminalizing trivia like Kinky can't smoke a cigar.

(END VIDEOTAPE)

BLITZER: And still ahead, the former Federal Reserve Chairman Alan Greenspan's economic outlook.

Plus, Hillary Clinton and Rudy Giuliani holding on to first place in the polls. Some of the best political team on television coming up when "Late Edition" returns.

(COMMERCIAL BREAK)

BLITZER: This is "Late Edition," the last word in Sunday talk.

Eye on the economy.

(BEGIN VIDEO CLIP)

ALAN GREENSPAN, FORMER CHAIRMAN, FEDERAL RESERVE: The American economy's rate of growth is definitely slowing down.

(END VIDEO CLIP)

BLITZER: Former Federal Reserve chairman Alan Greenspan weighs in on the mortgage crisis. His new book, "The Age of Turbulence" and what he thinks is the real reason for the war in Iraq.

The race for the White House.

Hillary Clinton, Rudy Giuliani, right now, both first in the polls and the money race. We'll talk about the presidential sweepstakes and the week's other big political stories with three of the best political team on television.

The second hour of "Late Edition" begins right now.

ANNOUNCER: Live from CNN in New York, this is "Late Edition" with Wolf Blitzer.

BLITZER: Welcome back to "Late Edition." Last year, Alan Greenspan stepped down as the Federal Reserve Board chairman, after serving a record-setting tenure under four American presidents.

On his watch, the U.S. economy experienced some generally high growth.

Now, Greenspan is back in the spotlight with a brand new memoir, "The Age of Turbulence." I spoke with him this week.

(BEGIN VIDEOTAPE)

BLITZER: Alan Greenspan, thanks very much for joining us.

GREENSPAN: It's been my pleasure.

BLITZER: Congratulations, first of all, on this excellent new book, "The Age of Turbulence." I want to discuss some of the more provocative words you write in the book. That's coming up. But let's talk about what's happening in the U.S. economy right now.

A lot of people are watching this program who are nervous, maybe understandably so, about what is going on.

How nervous should they be generally about the American economy?

GREENSPAN: I think they ought to be cautious, but nervous doesn't help. I think the best way of putting it is that the American economy's rate of growth is definitely slowing down.

And because the housing industry, and most specifically, home prices, the odds of a recession over the next six to nine months have gone up from about a third, which is where I thought it was in March, to somewhat between a third and a half.

BLITZER: Now define recession. You're talking in terms like an economist. That would be successive quarters where there's negative growth; is that right?

GREENSPAN: Precisely. The odds of that happening are less than 50/50.

BLITZER: But that's not necessarily all that encouraging, if you think it is a 50/50 chance, or less than 50/50 that there would be recession, which would have very severe, very dramatic ramifications for American consumers.

GREENSPAN: No. Only if it is severe. At the moment, I'm just really postulating, if it happens, a mild recession.

Remember, Wolf, it's never clear what's going to happen 12 months out. Economists will give you forecasts that go out with a long series of digits. We really don't know. And we're always confronted with the fact that there's a significant amount of potential unknown. And we don't know what it is, but we do know that history tells us that something often happens. And that is why you can never say the chances of a recession are nil.

BLITZER: What needs to be done now by the president, by the Congress, by the Federal Reserve, to make sure there isn't even a mild recession?

GREENSPAN: I doubt very much if there is anything that can or should be done. Because remember, we have a very complex, self- calibrating, self-adjusting economy. And what our problem currently is, is the fact that we've got more than 200,000 newly constructed homes for sale in inventory.

And that's twice what ordinarily would be the case. Or I should put it this way, it's a 200,000 excess, and the absolute level of inventories of new homes is approximately eight months, when the normal is usually four. What that means is that builders around the country, having a very large stock of new and deteriorating new homes, are beginning fire sales in the marketplace. And prices are beginning to fall.

BLITZER: The housing market, the prices are going to go down. So is that bad or is that good?

GREENSPAN: Well, it depends -- it's the -- it depends on how fast it happens and how quickly we get it out of the way. There is -- at this stage, we're already in the price decline. And the difficulty that we have is that even though housing construction has come down very significantly, it's just basically a shade below where sales are, which means that the inventory rate of liquidation is very small.

And we have to accelerate that and get it out of the way before we can confident that the economy will get back on track.

BLITZER: How worried should Americans be about the decline of the value of the U.S. dollar?

And we're going to put a chart which shows a pretty steady decline over these past three, four years.

It's now to the point where the U.S. dollar and the Canadian dollar are virtually the same. The Canadian dollar might even be worth more than the U.S. dollar.

GREENSPAN: Well, unless you go abroad, which, of course, you can see the effect, there's no evidence that it is a significant element at this stage. What ordinarily would happen in history is, if the dollar would get significantly weak, you would get acceleration in inflation.

But even though I am, as you know, as I say in my book, the longer run has got more inflationary impact. There is no real evidence, right now, that that's a major problem.

BLITZER: The housing market and the bubble, the mortgage -- the credit crunch, all of that is clearly having an enormous impact right now. On "60 Minutes," you said this: "While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late. I didn't really get it until very late in 2005 and 2006."

So what you're saying is that even Alan Greenspan, the former chairman of the Federal Reserve, did not foresee what has happened.

GREENSPAN: No, no. I was referring strictly to the subprime market.

BLITZER: That was -- in that quote?

GREENSPAN: Yes. The subprime market, per se, would not have been a problem if we had not securitized a very substantial amount of loans, meaning that what a lot firms, Wall Street firms, did was take large bundles of subprime mortgages, and because geographic diversification improves the quality of those loans, put them in package and sold them all over the world.

The problems that we're experiencing -- and frankly we just now seem to be getting out of it -- were largely the consequence of the corrosive effect of mispricing a lot of those loans because...

BLITZER: In other words, enticing people to go out and buy a house with a subprime adjustable rate mortgage that they probably should have had no business buying.

GREENSPAN: Precisely. There was a lot of egregious activity. As I said in the speech in London the other day, a goodly part of this is that the demand for subprime securitized mortgages was very high because the rate of return was very high.

And at that time, home prices were rising significantly quickly so that foreclosures and delinquencies in subprimes were really small.

BLITZER: Have we seen the end of this crisis involving the subprime and the bubble?

Or is it going to get worse?

GREENSPAN: We are close to the end of this particular phase of it. In other words, we are beginning to see markets come back and come back normally. But...

BLITZER: A lot of people in the process are going to lose their homes.

GREENSPAN: Oh, indeed. There is still a goodly part of foreclosures in the pipeline for subprimes. I might add, it's only for adjustable rate subprimes.

BLITZER: Right. Well, why shouldn't the banks and the lenders work with these homeowners and work out a new schedule for -- because foreclosing a home isn't good for the bank either? GREENSPAN: No. In fact, that's precisely what is happening. A bank doesn't like to foreclose. They lose a lot of money when you foreclose. It's a fire sale, effectively.

BLITZER: Right.

GREENSPAN: And most foreclosures -- I shouldn't say most, but a significant proportion of foreclosures never end -- don't end up with the homeowner losing the home, because a work-out is constructive in manner which the lender finds it to his advantage to keep the person in the home.

BLITZER: Lots more coming up. When we come back, Alan Greenspan talk about his new book, "The Age of Turbulence" and why he thinks the U.S. really went to war in Iraq.

Much more "Late Edition," right after this.

(COMMERCIAL BREAK)

BLITZER: New York City on this Sunday. Welcome back to "Late Edition." We're reporting from New York. Here's part two of my interview with the former Federal Reserve chairman, Alan Greenspan.

(BEGIN VIDEOTAPE)

BLITZER: A lot of people complain that the United States is losing manufacturing jobs to other countries around the world. But you take a different assessment in your book, "The Age of Turbulence."

You write this: "The loss of traditional manufacturing jobs in the United States is often considered a worrisome hollowing out of the economy. It is not. On the contrary, the shift of manufacturing jobs in steel, autos and textiles, for example, to their more modern equivalents in computers, telecommunications and information technology, is a plus, not a minus to the American standard of living. Traditional manufacturing companies are no longer the symbol of cutting-edge technologies."

You know, that's not a popular view, that the unions out there, a lot of people out there saying, you know what, they hate the fact that these jobs -- these traditional jobs at the steel mills or the auto plants, they're going to countries, whether in China or Taiwan or elsewhere.

GREENSPAN: The sad fact, and it is a fact, is that the only way to get standards of living rising is to gradually phase the capital out of obsolescent industries and technologies, into cutting-edge technologies. I mean, output per hour...

BLITZER: A lot of people would suffer though in the process of that transition.

GREENSPAN: There's no question about that. The one problem that we have is that there is no alternative. If there is going to be progress, there is going to be what Schumpeter, the famous Harvard economist, called "creative destruction."

There is no problem in moving the capital from the lesser productive industries into the newer, but we have people there. And the people are laid off or they lose jobs, and it is a struggle to find new avenues. And that's the reason why the major part of our education system, which is moving rapidly, are community colleges.

BLITZER: But you say one thing that could really help get this country, the economy going, is better and more sophisticated immigration into the country. You write this: "We can immediately both damp skilled-worker income and enhance the skill level of our work force by opening our borders to large numbers of immigrants with the vital skills our economy needs."

Now, you know you're going to be criticized for that. They are going to say, why should you let these people come in and get these jobs -- these are good jobs -- when there are Americans who could be getting these jobs? Explain why you think it is good to let the immigrants come in and take these jobs.

GREENSPAN: If there were enough Americans for those jobs, the rate of increase -- a skilled wage premium, which has been gradual, persistent in creating a significant inequality of income this country, if we were able to educate enough Americans to fill those jobs, those wages wouldn't be rising, inequality wouldn't be rising. And what I consider a very considerable threat to our society would not exist.

The reason I look for bringing skilled immigrants in is we pay the highest skilled wages in the world. We would attract a large coterie of very skilled people. The increase in supply would suppress the wage levels of the skilled and bring the degree of inequality back more into line.

As I point out in earlier chapters in the book, it's the relative issue which is the fundamentally important question that we have to address. Also, technology is moving at a pace faster than we are able to educate our children, not only the United States...

BLITZER: So basically you see a great value in opening the borders.

GREENSPAN: Oh, absolutely.

BLITZER: All right. Let's talk a little bit about an uproar that you caused when the book first came out. In the book on page 463, you write this: "I am saddened that it is politically inconvenient to acknowledge what everyone knows: The Iraq war is largely about oil."

Now there has been a lot of interpretations of what you meant, what you didn't mean. But give us a very quick summary of your explanation for writing those words.

GREENSPAN: If there were no oil under the sands of Iraq, Saddam Hussein would not have been able to build up the real resources that he did -- financial resources and other resources to threaten his neighbors.

He invaded Iran. He invaded Kuwait. He was threatening Saudi Arabia. And it was very clear to me, watching him for 30 years that where he was going was to try to control the flow of Middle East oil through the Straits of Hormuz, which, if you were able to do that, which is 18 million barrels a day out of 65 million -- out of 85 million barrels a day, he could have shut down a substantial part of world production. And the effect would have been devastating.

He would have -- I was fearful that he would do that if he could gain control, that is, purchase some nuclear device. And I have always been wondering with the problems of the -- when the Cold War ended, and there was very serious questions at that time whether or not the Soviet arms had been protected, I had always assumed that a lot of them flowed out. And I must admit, I'm very surprised they haven't shown up.

BLITZER: At this point. But do you still see oil as being a major factor, if not the major factor in driving U.S. policy toward Iraq right now?

GREENSPAN: Well, actually, I'm talking about my view in there. In other words, what the real economics of the dangers are. As far as the administration is concerned, I have no reason to disbelieve what they have been saying, namely that there were weapons of mass destruction. I thought there were weapons of mass destruction because of the way Saddam was behaving: What's he hiding?

BLITZER: Anyone who reads this book can't help but come away with your deep admiration for the economic policies that were practiced during the eight years of the Clinton administration, with the first secretary of the treasury, Lloyd Bentsen, then Bob Rubin who followed him, as opposed to your criticism of the way the economic policies, tax policies were followed by the Bush administration over these past 6 1/2 years or so. Is that a fair assessment?

GREENSPAN: It's a fair assessment up to a point. My real concern and angst was not initially with the administration but with the Republican Congress.

BLITZER: Which was spending a lot of money.

GREENSPAN: Well, they started off, you may recall, in 1994 with an agenda which, as a libertarian Republican, I found very important and should be pushed. As soon as they got into power they gradually morphed towards seeking different aims. And as I say in the book, they soon swapped principle for power and in the end achieved neither.

BLITZER: Cheney, the vice president -- and you were close with Dick Cheney for a long time. I don't know what your relationship is with him right now -- he responded in an article he wrote in The Wall Street Journal. And he said this.

The article entitled "The Real Bush Record": "President Bush's tax cuts -- following through on a tax cut he made to voters -- resulted in a shallower recession, a faster recovery, and a platform for growth that remains sturdy to this day. The fact is that in a time of unprecedented challenge, the United States has experienced nearly six years of uninterrupted economic growth and added more than 8 million new jobs since August 2003, more than all other major industrialized nations combined."

Is he right?

GREENSPAN: He's absolutely accurate, but that is not where my criticism was coming from.

My concern was basically that, as I said on many occasions, that President Bush did not exercise his veto to constrain Republican spending.

BLITZER: There were not vetoes when the Republicans were in the majority, but there have been four vetoes now since the Democrats became the majority.

GREENSPAN: It would have been far better to start off practice vetoing earlier on because I believe he could have constrained what I thought was frankly an -- egregious policies on the part of the Congress.

BLITZER: We are almost out of time, but economically, $2 billion, maybe $3 billion a week being spent on the war in Iraq. Can the U.S. economy afford $100 billion or $150 billion, $200 billion a year for this war?

GREENSPAN: Well, let me just say that the reason why Cheney's numbers are correct and indeed his views are correct, my concern is in the longer term, we are not confronting the long-term budget imbalances.

There is no question that we are spending a great deal on the war. Hopefully, that will come down. That will not solve the very significant longer-term fiscal problems, very specifically Medicare.

And I think that is what the Congress -- the Republican Congress failed to address. That is what we are failing to address now. And unless we get to it very quickly, it is going to become a major problem for this country.

BLITZER: And very quickly, on the Medicare and Social Security, what's the solution, simply to reduce benefits for the retirees?

GREENSPAN: Well, quickly, granted the economics, the demographics and the politics, I would forecast that there is going to be a very significant means test of Medicare in the future because we have just -- I agree with Jim Cooper from Tennessee, we can't meet the commitments that are currently under law.

BLITZER: And that means that if you're richer, you are going to get less benefits than if you're poorer.

GREENSPAN: Correct. BLITZER: The book is entitled "The Age of Turbulence" by Alan Greenspan. The subtitle "Adventures in a New World." Mr. Chairman, thanks for writing it. Thanks for coming in.

(END VIDEOTAPE)

BLITZER: And up next, a look at where some of the presidential candidates are on the campaign trail. Then, round three of the money primary. We're going to take a closer look, talk about the winners, the losers with the best political team on television. "Late Edition" continues right after this.

(COMMERCIAL BREAK)

BLITZER: Let's take a look at where some of the U.S. presidential candidates will be spending some time over the next few days on the campaign trail. Mike Huckabee is in Arkansas today. The former governor is staying on his home turf for some fund-raising. Chris Dodd is in Iowa, where he's spending today holding a series of community forums.

Duncan Hunter heads to Pontiac, Michigan tomorrow to participate in a presidential forum. Dennis Kucinich is in Portland, Oregon, where he'll be celebrating his birthday tonight at a fund-raiser. Rudy Giuliani will be in Dearborn, Michigan Tuesday, where he and all the Republican candidates will be participating in a debate.

And John Edwards heads to Oregon Tuesday to attend the state's AFL-CIO's 50th convention. On the campaign trail with some of the presidential candidates.

Just ahead, Senator Larry Craig is hanging in there in the Senate despite some serious legal setbacks this week. How will it affect the Republican Party? We'll get insight into that and a lot more with three of the best political team on television. "Late Edition" continues right after this.

(COMMERCIAL BREAK)

BLITZER: A lot of action on Capitol Hill on the presidential campaign trail this past week. So let's get right to it with three of the best political team on television.

Holding down the fort in Washington, our White House correspondent, Suzanne Malveaux. Here in New York, CNN correspondent Mary Snow of "The Situation Room" and senior political analyst Mark Halperin from our sister publication, Time magazine. He's also the author of a brand-new book entitled, "The Undecided Voter's Guide to the Next President: Who the Candidates Are, Where They Come From, and How You Can Choose." Mark Halperin, thanks for coming in as well.

Let's start off with this new poll. The Des Moines Register poll, in Iowa, among the Democratic presidential candidates, Mark, shows Hillary Clinton with 29 percent, John Edwards, 23 percent, Barack Obama 22 percent. Everybody else in single digits. Richardson at 8 percent, Biden at 5 percent. She's on top. Edwards had been on top earlier. What's going on?

MARK HALPERIN, TIME MAGAZINE: Well, you look at the little fine print there, the margin of error 4 percent or so. So this race is close. All three of those candidates are strong.

Iowa, for the Democrats, is the one place to stop Hillary Clinton. If nothing else changes and she wins Iowa, I think she walks the nomination.

BLITZER: Because she can win in New Hampshire?

HALPERIN: She'll take the momentum right to New Hampshire and elsewhere, where she's so strong. So Obama and Edwards must stop her there. They can stop here there. There's still a lot of flux in Iowa.

But being ahead is a nice place for her to be, in the state that was her weakest state.

BLITZER: Suzanne, if you take a look at the ABC/Washington Post poll, nationwide, among registered Democrats, it has Hillary Clinton -- look at this -- with 53 percent of those who are responding, Obama down at 20 percent, Edwards at 13 percent.

So while it's close in Iowa, nationally, Suzanne, she is really expanding her lead.

SUZANNE MALVEAUX, CNN CORRESPONDENT: And you're been seeing that for months now. And really, I guess, the big question here is, how can Barack Obama turn this around, his campaign?

They say that there are two things that are working for him. That is time, as well as money. He does have a lot of money and he still does have months ahead before they're going to make that decision.

But there are some worrisome signs here that, yes, that margin has not only become wider but it's also very, very consistent here. It seems as if Obama needs another message here. He does very well with young voters. But they are split when it comes to the African- American vote as well.

BLITZER: And you know, she would love, Mary, to have this inevitability come forward that she's got it locked up, basically. It's a fight, though, in Iowa, as Mark accurately points out.

On the other Republicans, we know John Edwards is, to a certain degree, but are they going to become increasingly more aggressive in going after the frontrunner, Hillary Clinton -- the Democrats, Democratic presidential candidates?

Will Obama get tougher? Will the others get tougher with her?

MARY SNOW, CNN CORRESPONDENT: Well, that is one thing. You know, there's been so much pressure on them to get tougher. But they have in Iowa. And you can see the outcome of it. She has gotten ahead. And that's the big question, is can they stop her?

I still believe that so many voters are undecided in these states, no matter what the polls say. But there has been pressure. And right now, we've seen John Edwards' wife, Elizabeth Edwards; also Michelle Obama doing more of that attacking.

BLITZER: It's easier, to a certain degree, for the spouses to get tough than it is for the actual candidates, although I suspect they will get tougher.

Let's take a look, Mark, now, at the Republican side, nationally. The ABC News/Washington Post poll that recently came out has Giuliani on top with 34 percent. It's been very consistent; Fred Thompson at 17 percent; McCain down at 12 percent; Romney, 11 percent.

HALPERIN: I'm a convert to the notion that Giuliani can be the Republican nominee. I used to be like a lot of people and think he was just too liberal for the party.

BLITZER; Because of his views on social issues?

HALPERIN: And his temperament, and the fact that he's a former mayor of New York. But he has an image with the American people. I don't want, now, from having been a skeptic, now, to go too far the other way.

But every week that goes by where they don't take him down in the national polls, where he plays the expectations game in Iowa and New Hampshire very well, positioning himself to win in the bigger states; every week they don't take him down, he's a week closer to the nomination.

And I think we saw, last week, when Governor Romney tried to engage him on taxes, and, I think, largely failed to win that, at least decisively, shows it's going to be hard to take him down, despite his moderate views.

BLITZER; But take a look at Iowa, Suzanne, the new Des Moines Register poll that just came out today. Look at this. Mitt Romney is atop with 29 percent. He's spending a lot of money there on commercials; Fred Thompson at 18; Huckabee at 12; and the Giuliani at 11 percent; John McCain at only 7 percent in Iowa.

Mitt Romney is doing very well in Iowa and New Hampshire, states that are clearly critical, even though he's not doing all that well nationwide.

MALVEAUX: And really, it speaks more to how Giuliani is performing here, some of the challenges that he has. First a problem with the Catholic vote. There is a question whether or not he's going to be able to steal that away from Hillary Clinton.

There is also the problem, this week, as you know, the evangelicals -- they came out, several groups, saying that perhaps they would support -- at least they threatened that they would support a third-party candidate if they didn't really see Giuliani coming around on some of those socially conservative issues.

And thirdly, Wolf, there was an ad that was put out by Hillary Clinton in Iowa and New Hampshire, attacking, not by name, but the record of those 9/11 firefighters, how they were treated when it comes to health care.

He's going to have some questions to answer to. And that really -- that poll speaks to what's happening with Giuliani.

BLITZER: You know, Mary, you've covered Giuliani for a long time. You've been in New York all of these years. He's a fighter and he's a very strong politician. He's got to get -- he'd like to look ahead and fight Hillary Clinton right now. But he's got to fight fellow Republicans, which is a little bit more difficult for him.

SNOW: And by focusing on Hillary Clinton, then some of the criticism about his social issues are not so much focused on.

But I have to agree with Mark, that every time that he is able to defy the odds -- and you know, here in New York, if you could see, just by looking at the local press, New York has a very different view of Rudy Giuliani.

And so many people here had suggested that perhaps, when the rest of America really saw him, that they would not support him. And that has turned out not to be the case.

So, you know, he has gotten a pretty strong standing there. But fighting those Republicans Tuesday will be interesting.

BLITZER: What you're saying, a lot of people in New York, in New York City itself, they remember Rudy Giuliani favorably because he cleaned up the place and he reduced the crime and he made the city more livable. But there's another group of people who don't like him.

SNOW: Exactly. And just to Suzanne's point about these Hillary Clinton ads, you know the Firefighters Union here in New York, for one, had a video a couple months ago that was very critical of Giuliani. A lot of those 9/11 workers have been openly critical of him.

And there has been this, you know, mixed record among New Yorkers on his record.

BLITZER: Let's talk a little bit about the money. Because we've got the third quarter money that was raised, Mark.

And we'll start with the Democrats. Hillary Clinton came in with $27 million over the past three months, Barack Obama with $20 million. John Edwards came in third with $7 million, that on the Democratic side.

On the Republican side, Rudy Giuliani came in with $11 million; Mitt Romney, $10 million. He gave himself about another $8 million; John McCain, $6 million; Ron Paul, almost as much, with $5 million dollar.

Why are the Democrats, the two top Democrats, raising so much more money than any of the Republicans?

HALPERIN: Well, mostly, it's the enthusiasm, I think, for the Democratic Party in general. Democrats are hungrier to take back the White House. They see candidates who they feel strongly about. And those two candidates have built a national network based on their fame and based on their political contacts.

I think the Republicans will have enough money in the general election. And they're relatively equal, with the exception of Governor Romney's personal money, for the nomination fight.

But it is a sign that is generally causing Republicans to be somewhat discouraged and say it will be difficult, come the general election, to take on an energized Democratic Party.

BLITZER: And they've got a lot more contributors. It really is energized, the Democratic Party, Suzanne. They're getting more money from more individuals out there than a lot of the Republicans combined.

MALVEAUX: Well, you're right, because you look at that figure for Hillary Clinton there. That is three times the top three Republican candidates combined here.

And we even heard from Giuliani this week, commenting that he was quite concerned about February, March, how are you going to actually raise the kinds of dollars and be competitive against somebody like Senator Clinton. It's going to be difficult.

BLITZER: The money -- and you see it happening all over the country. These guys, Mary, are spending so much time raising money, but they're also finding the Internet is becoming an increasingly valuable tool for them to reach out and find the cash.

SNOW: And the perfect example of that, this week, is Ron Paul, raising about $5 million, and he's got a lot of support on the Internet. It really caught so many people by surprise. Because it was about the same amount that John McCain raised?

BLITZER: What does that say, Mark, that Ron Paul, a Republican presidential candidate, a little-known congressman from Texas and John McCain, who's arguably well known to everyone, has been around for a long time, that they're raising, basically, in the last quarter, almost the same amount of money.

HALPERIN: Well, a warning sign for Republicans that the war in Iraq, which Ron Paul is the only Republican candidate who opposes it, is a big issue for a lot of voters.

I suspect a lot of the people giving him money share his strong opposition to the war. That's a warning sign for the Republican nominee, whoever it is, assuming it's not Ron Paul.

The other thing is, Ron Paul has raised a lot of the money, as, Mary, you suggested, on the Internet. Democrats have been stronger there. The Republican nominee, whoever it is, is going to have to figure out how to be competitive raising money on the Internet, or it's going to be a real problem next year.

BLITZER: Why has the Internet, so far, Mark, been better for the Democrats than for the Republicans?

HALPERIN: Well, partly, younger people who are more opposed to the war, more in line, in many respects, with the Democratic agenda. And also, Democratic activists, political activists, politically interested people who don't have talk radio to go to have gone more to the Internet than have Republican activists.

But it's mostly, I think, that enthusiasm for the party, based on opposition to President Bush, opposition to the war in Iraq, people who aren't necessarily the kind who go to fund-raisers, who don't give in the normal way but are now turning to the Internet: one, two clicks and you give some money.

BLITZER: All right guys, stand by because we have a lot more ground to cover with our political panel.

Also coming up, the House speaker, Nancy Pelosi. She was part of the Sunday morning talk show circuit. We're going to tell you what she had to say in our "In Case You Missed It" segment.

Much more "Late Edition" right after this.

(COMMERCIAL BREAK)

BLITZER: And now, in case you missed it, let's check some of the highlights from the other Sunday morning talk shows here in the United States. On Fox, the House speaker, Nancy Pelosi, addressed why she thinks Congress has such low approval ratings.

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI, D-CALIF.: The public is weary of this war. They want it to end and they had expectations that Congress is going to end it. You know we can't without a presidential signature. But that focus on the war has eclipsed all that we have accomplished here.

JOHN EDWARDS, DEMOCRATIC PRESIDENTIAL CANDIDATE: Voters have a very clear choice. Democratic voters have a very clear choice between Senator Clinton, with both all of the good and bad that comes with her, and John Edwards, who has actually won in a red state and who could compete every single place in America. I do believe, when I am the Democratic nominee for president, that there is no place in America that I can't go and campaign and help our Congressional candidates and help our Senate candidates.

(END VIDEO CLIP)

BLITZER: And on ABC and CBS, the talk focused on President Bush's decision to veto the expansion of children's health insurance.

(BEGIN VIDEO CLIP)

SECRETARY OF HEALTH AND HUMAN SERVICES MICHAEL O. LEAVITT: The president's position on this can be summarized in three words: poor children first. Poor children ought to have health insurance before we begin to focus on adults. They ought to have it before we start focusing on middle-income families. The president just thinks it's wrong that some, under this bill, could receive the public subsidy for health insurance.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

REP. CHARLES B. RANGEL, D-N.Y.: I think the president has a big problem over the fact we're putting a cigarette tax in and president comes in saying no more taxes. But we had to choose between the cigarette tax and protecting 10 million children and giving them health care.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

REP. ADAM H. PUTNAM, R-FLA.: We believe that before we expand the scope of this program and get distracted by other things, we should make every effort to enroll every eligible child in this very important program.

(END VIDEO CLIP)

BLITZER: Highlights from the other Sunday morning talk shows here on "Late Edition," the last word in Sunday talk. When we come back, our political panel will talk about the presidential veto of that health insurance program for kids. We'll also talk about the political fallout from Larry Craig's decision to stay in the Senate.

Much more "Late Edition" right after this.

(COMMERCIAL BREAK)

BLITZER: Welcome back to "Late Edition." We're back with three of the best political team on television: our White House correspondent, Suzanne Malveaux, "Situation Room" correspondent Mary Snow and Time magazine's Mark Halperin. Suzanne, the decision by Idaho Republican Senator Larry Craig not to give up his day job in the U.S. Senate and not to retire as he suggested earlier was his intent, what's the political fallout for the Republicans in the Senate?

MALVEAUX: Certainly, it's potentially a big political problem for the Republicans. We really only saw two Republican senators speaking out on his behalf. One of them, Senator Arlen Specter who thought he should fight it along.

But if you believe what the White House has said before, they said they didn't believe that they actually lost the majority in Congress due to the war in Iraq. They said they thought it was specific races, people who were having problems, ethical problems. And therefore, if you see Senator Craig again in office in that seat, they're just going to be reminded over and over again that, yes, it's the Republican Party. It's the members of that party that are having problems when it comes to ethics.

BLITZER: And you know, it's interesting, Mary, that it's the Republican leadership in the Senate that would really like to see Senator Larry Craig go away because of the embarrassment involving that bathroom sex sting in Minnesota earlier in the summer. They want it to go away. Democrats aren't urging him to step down. There presumably will be this Ethics Committee investigation, but it's the Republicans who would simply like him to go, and he's not.

SNOW: Right, and imagine the attention focused on an investigation, an ethics investigation is, just as Suzanne said, a reminder all of the time of the embarrassment. And with Republicans struggling, that is not going to help them at all.

BLITZER: Let's take a look at the prospects for the Democrats, Mark, expanding their majority in the U.S. Senate. More Republican seats are up. A third of the Senate is up for re-election this time around, but there's five incumbents who already said that they're going to retire: John Warner of Virginia, Wayne Allard of Colorado, Chuck Hagel of Nebraska, Pete Domenici of New Mexico, and Larry Craig of Idaho. Even though he says he's going to serve the balance of his term, he says he's not going to seek re-election. At least that's what he says right now. He could clearly change his mind if he wants.

Four of those, with the exception of Idaho, are pretty competitive, especially if Bob Kerrey decides to go back to Nebraska and seek his old Senate seat. Can the Democrats realistically get to that magic number of 60 in the Senate, which would be filibuster- proof?

HALPERIN: Getting to 60 will be hard if you look at the races in play. But they can get awfully close and then maybe get one lucky break in a state we're not expecting.

Everything's gone their way. The retirements have gone their way. They've kept all their members. Republican retirements. They're raising more money than the Republicans. The national environment, not just Larry Craig but the war in Iraq, is helping Democrats.

So right now you'd say they're going to gain seats. Getting to 60 will be tough, but it's going to be probably a very good year for Democrats in the Senate races, even in some red states. BLITZER: Suzanne, if you take a look at some of the vulnerable Republican incumbents who are seeking re-election, we've made a list: Norm Coleman of Minnesota, John Sununu of New Hampshire, Susan Collins of Maine, Gordon Smith of Oregon, those are only four. There are more potentially vulnerable Republicans.

You cover the White House. How are they watching all of this unfold? Because right now, at least, it don't look like things are falling in the Republicans' way.

MALVEAUX: And really, the only thing the White House can do at this point, because I've been speaking to folks, obviously, the president's going to go out and campaign and try to help some of those vulnerable candidates. But the other thing that they're trying to do is at least convince the Republican Party that they are going to hold off on this spending.

We're going to hear a lot about tax and spend, about the government and the budget battle here. That is something that the White House lost ground on, Republicans lost ground on, and they know they lost really the trust of the party when it came to the fiscal conservatives, but also the independents. They abandoned the party back in 2006. They are trying to redeem themselves now, and that is one way that they're going to do it.

BLITZER: I suspect, Mary, that these vulnerable incumbents who would like to get re-elected, they'd welcome the president raising money for them, but they don't necessarily want to see him play that active a role in states like New Hampshire or Minnesota, where the president is clearly not all that popular.

SNOW: Yeah, and that is the big challenge. Because do you really want to be seen in lockstep with such an unpopular president? And also wanted to point out, in two of the states, Nebraska and Virginia, where we're having senators retire, those two senators have not been in lockstep with Republicans when it comes to Iraq. So, that whole question of aligning yourself with the president is a catch.

BLITZER: The whole decision by the president to veto this expansion of this popular children's health insurance program that he did do this week, and the Democrats, they have the votes of the Senate to override the veto, but not yet in the House of Representatives. The political fallout is going to be significant.

I want you to listen to how the president, Mark, is explaining that decision to veto this health insurance program for kids.

(BEGIN VIDEO CLIP)

BUSH: I happen to believe that what you're seeing, when you expand eligibility for federal programs, is the desire by some in Washington, D.C. to federalize health care. I don't think that's good for the country. I believe in private medicine. I believe in helping poor people.

(END VIDEO CLIP) BLITZER: All right. Mark. Is this a winning issue for the president? Is it a winning issue for Republicans right now to have this big brawl over this popular children's health insurance program?

HALPERIN: Wolf, if we were in "The Situation Room" and James Carville were here, I think he would say, "If you're 'splainin', you're losing." And the White House is trying to explain this. And it's not a good political issue.

People who say George Bush only does the politically popular thing and tries to play to the polls, clearly, they're not doing that here. The president believes that expanding the program the way the Congressional bill would like is bad policy. And so he's taking a big political risk. It's really not a risk. It's a political loser.

No one in the Republican Party would defend this on the politics of it. But they're trying now to offer a compromise. In the radio address yesterday, the president suggested maybe he'd spend a little bit more. But this has not been a good political episode.

And it adds to that national environment. Democrats can argue as they did in 1992, give us a unified control of Congress and the White House, and we'll be able to do things like expand children's health insurance, which is popular with the voters.

BLITZER: All right. Explain, Suzanne, the president's thinking why he's drawn a line in the sand on this specific issue.

MALVEAUX: Well, sure, I mean, there are two things. There's a philosophical difference inherently, with the way the president thinks. He believes that this is really moving people, kids who have private insurance, to public insurance. He believes it should go exactly the opposite, that you should have poor kids who eventually have the means, their family have the means to move them in private insurance. Let the market sort out all of this. So that's the first thing.

The second thing, obviously, is the politics of this, and that is once again trying to prove they are able to control their spending. Senator Trent Lott, just this past week, met with President Bush. I asked him a question, and he said, well, yeah, you know, it was the Republicans who didn't do a good enough job in controlling that spending. Now we have to do better.

So you can see they're trying to kind of make up for things. But I want to say there is one problem that this White House has, and they're talking apples and oranges. You heard President Bush talk about eligibility. Nancy Pelosi said this morning, I'm quoting here, she said, "Forty days in Iraq equals the cost of 10 million children for health care in this coverage each year."

So she is talking about the cost of the war and associating that with this program. That could be really politically dangerous for the White House to try to get caught up in that type of debate.

BLITZER: I suspect we're going to be covering this story all this week. I want to thank all of you for coming in. Suzanne Malveaux in Washington, Mary Snow and Mark Halperin here in New York. And if you'd like a recap of today's program, you can get highlights on our new and improved "Late Edition" podcast. Simply go to cnn.com/podcast.

Coming up at the top of the hour, "This Week at War" with host Tom Foreman. Here's a preview.

TOM FOREMAN, HOST, "THIS WEEK AT WAR": Genocide in the jungles of Myanmar. Russian bombers off the coast of Alaska. And a glimmer of hope in Iraq. News from the home front and the battle front "This Week at War."

(COMMERCIAL BREAK)

BLITZER: That's your "Late Edition" for this Sunday, October 7. Please be sure to join us again next Sunday and every Sunday at 11 a.m. Eastern for two hours of the last word in Sunday talk. We're also in "The Situation Room" Monday through Friday from 4 to 6 p.m. Eastern, then another hour, 7 p.m. Eastern.

Until then, thanks very much for watching. I'm Wolf Blitzer in New York. For our international viewers, stand by for world news. For those of you in North America, "This Week at War" with Tom Foreman starts right now.

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